Jason Grumet, founder and president of BPC, is respected on both sides of the aisle for his innovative approach to improving government effectiveness. Grumet’s first book, City of Rivals: Restoring the Glorious Mess of American Democracy, was released in September 2014.

Olympia Snowe is a BPC senior fellow and co-chairs its Commission on Political Reform. With her election to the U.S. Senate in 1994, Snowe began an 18-year career in the Senate. She was the first woman in U.S. history to serve in both houses of a state legislature and both houses of Congress.

Henry Cisneros co-chairs BPC’s Housing Commission and BPC’s Immigration Task Force. In 1981, Cisneros became the first Hispanic-American mayor of a major U.S. city, San Antonio, Texas. In 1992, President Clinton appointed Cisneros to be Secretary of the U.S. Department of Housing and Urban Development.

G. William Hoagland is a senior vice president at BPC. Hoagland has completed 33 years of federal government service. From 1982 until 2003, Hoagland was a staff member of the Senate Budget Committee, serving as that committee’s staff director from 1986 to 2003.

Condoleezza Rice co-chairs BPC’s Immigration Task Force. She is currently a professor of political economy in the Stanford Graduate School of Business and a professor of political science at Stanford University. From January 2005-2009, Rice served as the 66th Secretary of State.

Former Senator Byron L. Dorgan is a BPC Senior Fellow and co-chairs BPC’s Energy Project. He served as a congressman and senator for North Dakota for 30 years before retiring from the U.S. Senate in 2011. He served in the Senate leadership for 16 years.

Thomas H. Kean is former governor of New Jersey (1982 to 1990). As governor, he served on the President’s Education Policy Advisory Committee and as chair of the Education Commission of the States and the National Governor’s Association Task Force on Teaching.

Dan Glickman is a BPC senior fellow, and he co-chairs its Commission on Political Reform, Democracy Project, Prevention Initiative, and Task Force on Defense Budget and Strategy. Glickman served as the U.S. secretary of agriculture from March 1995 until January 2001.

Pete V. Domenici is a BPC senior fellow, and he co-chaired its Debt Reduction Task Force, Health Care Cost Containment Initiative, and Task Force on Defense Budget and Strategy. Domenici served as a senator from New Mexico longer than any other person.

Doctor and Senator Bill Frist is a BPC senior fellow and he co-chairs its Health Project. He is both a nationally recognized heart and lung transplant surgeon and former U.S. Senate Majority Leader. Frist represented Tennessee in the U.S. Senate for 12 years.

BPC’s Debt Limit Projection: Key Takeaways

On January 7, the Bipartisan Policy Center (BPC) released the second part of its debt limit analysis. In November, BPC had projected that the debt limit would be reached in the last week of 2012, and special accounting maneuvers known as “extraordinary measures” would allow Treasury to continue to pay federal obligations in full and on time until some point in February 2013. With the passage of the American Taxpayer Relief Act of 2012, otherwise known as the fiscal cliff deal, and updated government financial data, BPC has been able to update and refine that projection, which includes a close analysis of daily cash flows over the upcoming months.

We have already hit the debt limit. Treasury officially reached the statutory borrowing limit (to be exact, $16,393,975,000,000, or just $25 million under the $16.394 trillion statutory limit) on December 31, 2012. To raise additional funds for paying the nation’s obligations, the Secretary has begun to use the approximately $200 billion in available extraordinary measures. Unless the debt limit is increased, eventually there will come a point when Treasury does not have enough cash to pay all bills in full and on time, and the government will be forced to default on some of its obligations. BPC refers to this date as the “X Date.”

The fiscal cliff deal didn’t change much. The main differences from BPC’s baseline policy assumptions are the continuation of enhanced unemployment benefits and higher taxes on very high income households. The impact of these policies on the next two months will be relatively small and partially offsetting.

BPC now projects that the “X Date” will occur between February 15 and March 1. Our model estimates that the most likely candidate for the X Date is in the latter half of that range. The odds are extremely low that the extraordinary measures announced by Secretary Geithner could delay a default beyond March 1 due to several large payments that are due on that day, including obligations to Social Security beneficiaries and Medicare providers.

There are two “wild cards” that could substantially impact our estimated X Date window. First, federal revenues are sensitive to broader changes in the economy; while Fiscal Year 2013 revenues have been exceeding Congressional Budget Office (CBO) projections –and BPC’s model takes this into account –this trend may or may not continue.

Second, and most importantly, Internal Revenue Service (IRS) tax refunds make up a substantial portion of cash outflows during February – around $100 billion in recent years. If the payment of tax refunds is significantly delayed for some reason, it would impact the timing of the X Date. (For more information on this “wild card” and the delayed tax filing season, click here)

How will Treasury make payments on or after the X Date? We don’t know. This would essentially be an unprecedented situation. In the month following the start of BPC’s X-Date window (February 15 – March 15), we project $277 billion in revenue and $452 billion in scheduled payments, meaning that $175 billion (39 percent) of obligations would go unpaid.

In one scenario, Treasury would prioritize some payments over others; our full report provides a couple of illustrative examples. Treasury, however, may not find that it has the legal authority or the technical capability to do this (because it might require extensive reprogramming of computer systems, which may not be possible in a short timeframe). An alternative approach would be for Treasury to wait until enough revenue is collected to make an entire day’s worth of payments at a time, meaning that all payments would be made in turn, but everyone anticipating funds from the government would see delays. BPC believes that this may be the more likely outcome because it lacks the legal and technical uncertainties entailed by the first option. In any scenario, we assume that Treasury would do whatever it could to ensure interest on the debt is paid in full and on time.

Substantial debt is scheduled to roll over after the X Date. In the month following the start of the X-Date window, about $500 billion in debt is expected to mature. Normally, this would be rolled over in a standard procedure by issuing new debt. Uncertainty surrounding the debt limit, however, could force Treasury to pay higher interest rates on this newly issued debt. Also, while very unlikely, there is a possibility that in a post-X-Date environment, Treasury may not have sufficient buyers to complete its standard auction operation.

Shai Akabas is the associate director for economic policy at BPC. He joined BPC’s Economic Policy Project in 2010, staffing the Domenici-Rivlin Debt Reduction Task Force that year, and assisted now-Fed Governor Jerome Powell in his work on the federal debt limit in 2011.